We often talk about opportunity costs, or the cost of not taking action. While this term is prevalent throughout the business world in general, it can be a very sensitive issue for energy management professionals responsible for driving continuous improvements. Although energy management investments deliver high and sustainable returns, they often find themselves low on the list of priorities. In many cases, actions not taken and opportunities lost.
Our recent Industrial Energy Management (IEM) research study has shown that the opportunity cost is, in fact, quite significant today. We surveyed more than 200 industry executives about the adoption of emerging technologies across energy procurement, consumption, and reporting, as well as their year-over-year performance improvements. In this post, we’ll use that data to highlight the impact of technology on performance, but first let’s talk about the reasons behind inaction.
What’s the Holdup with Industrial Energy Management Investments?
Although it was traditionally considered just another “cost of doing business,” manufacturers today are becoming increasingly conscious of the fact that energy costs make up a good portion of production costs. And, that the ability to reduce energy costs can go directly to the bottom line. As a consequence, we’ve seen a rise in the number of organizations adopting formal energy management programs like ISO 50001 or ENERGY STAR—31% have adopted one in the past 1-3 years.
Formal energy management programs generally delineate the roles of people and help to standardize processes with the end-goals of reducing energy consumption and improving energy efficiency. In many cases, we tend to see companies with formal energy programs focusing on the “low hanging fruit,” or those gains that are easily attainable—which may include fixing lighting issues in a factory or fixing a leaking water pipe.
These programs benefit those focused on reducing energy costs, but, unfortunately, the benefits tend to taper off rather than sustain or even accelerate over time. Where we see them falling short is in the area of technology. There are few requirements for technology, so how companies support people and processes is left to discretion. And, since technology can be costly (up front), it’s easy for budget holders and decision-makers to bypass such an investment for another one.
The Cost of Inaction with Industrial Energy Management Technology
IEM technology drives visibility into all aspects of energy across the enterprise, providing professionals with the information and tools needed to do their jobs more effectively. We’re seeing more focus on the deployment of automated data collection technology at the asset level, and complementary deployments of plant-level and enterprise-level reporting and analytical tools. The connection between these technologies is enabling a more strategic approach to progressing toward energy reduction and efficiency goals.
We could preach about the benefits of IEM technology all day, but nothing speaks louder than data. Looking at the survey responses from our IEM study, we can cross-analyze energy management performance improvements with the adoption of IEM technologies. In particular, we can look at the improvements attributable to IEM automation technology and software with the energy intensity metric (the amount of energy used to produce a given amount of product).
As shown above, across all three categories, companies with IEM technology deployed experienced nearly double the performance improvement in energy intensity as compared to all respondents. Not only does this show a significant disparity in performance improvements, those manufacturers with IEM technology deployed will be more likely to sustain improvements over time. Everything else remaining equal, we can only expect this gap to widen over time.
Where to Start with IEM Technology?
Today’s leading companies are facing more pressure than ever to improve energy performance and reduce environmental impacts. This is clear by the aggressive goals listed in corporate sustainability reports we’ve seen in recent years. But are those goals really achievable? That’s a question that can only be answered by closely inspecting your current IEM capabilities and your future deployment plans.
Our newest research paper “Why Now? The Cost of Delaying Industrial Energy Management Software Investments” dives deeper into this topic, sharing more benchmark data and actionable recommendations for companies aiming to transform IEM into a source of competitive advantage. It’s written for senior leaders hesitant to pull the trigger on an IEM investment. You can read it by following the button below: